Study on the French Beef Market

I - SLAUGHTERERS-PROCESSORS AND WHOLESALERS

Twelve slaughterers-processors and meat wholesalers were interviewed. Contacts were not easy to establish and several of the interviewees granted us little time and gave only partial answers.

Most of the leading meat processors slaughter their own animals. Some (Soviba, Idéa, Bigard) satisfy their own supply requirements entirely with their own slaughtering and do not (or hardly) buy meat from other suppliers. Large processors which buy meat are prompted by the fact that they require more hindquarters than front quarters, need emergency suppliers or respond to low prices. Two of the interviewed companies have increased or are planning to increase their internal supply rate.

Most of the interviewed companies (processors or wholesalers) buy little or no young cattle. This type of meat is not adapted to the French market.

Suppliers are basically selected according to price-quality criteria. Some companies appear to stress prices, others quality. Many companies mentioned the need for regular quality and the "traceability" of meat (precise knowledge of origin) is an increasingly important concern. Many companies declared that they demand red and rather lean meat.

As regards standards, many companies have adopted the Europa standard. In terms of hygiene, most accept European and French legal standards, even if some go further and conduct additional tests.

Supplier relations are mostly informal. Only Kerméné and Sabim mentioned a specifications manual. Relations are based on confidence acquired through long-term relations. Most of the interviewed companies stated that they prefer long-term relations with their suppliers. The

length of a relation is considered to enhance the regularity of quality and to improve the efficiency of logistics. Delivery times are short and lower stocks is a general objective.

Such long-term relations do not prevent frequent price negotiations (often every week) according to market trends. We had much difficulty obtaining information on margins. This subject is clearly taboo in the profession. However, we know that the commercial margin rate (commercial margin/purchase of goods) varies from widely from one company to the next. Thus, in 1991 it was over 15% for some and less than 5% for others.

On the whole, supplier relations remain traditional, which means that they rarely exceed the framework of commercial transactions. Most of the interviewed companies make no efforts to establish partnerships with their suppliers, notably to develop new products. The biggest processors appear most interested in this.

All interviewees import supplies (this was one of the criteria used to select companies for interviews). However, few of them have worked with Danish suppliers. Denmark is relatively unknown as a beef producer. Denmark has a rather positive image and even though some interviewees have reservations about it supplies, several companies (including large processors) seem ready to start negotiations. The main negotiation points are apparently prices, regularity of quality and adaptation of the supply to the specific features of the French market.

II - DISTRIBUTORS

Thirteen supermarket distributors were interviewed, all leading groups in the French food distribution industry.

Generally, the decision-making process with respect to mass distribution supplies differs markedly from one chain to the next, mainly depending on how centralized their organization is. Even if less obvious, this characteristic also determines meat purchasing.

The purchasing of meat is generally more decentralized than other purchases. However, stores (except Leclerc) generally have only limited decision-making power (apart from orders placed). Suppliers are generally approved at regional level. National management structures are

sometimes responsible for negotiations with leading manufacturers of brand products and frequently lay down strategies for regional management units and stores.

Most purchases are of ready-to-carve muscles, even if carcasses are still bought frequently (notably for upmarket products). Little or no young cattle is bought (except by Promodès and Prisunic).

Suppliers are selected according to their price-quality ratio. Quality seems to be becoming more important and certain groups have broken down their supplies into two quality levels. Regularity of quality is frequently mentioned as a supplier selection criterion.

As regards quality inspection, certain groups go so far as to inspect breeding conditions, while others accept regulatory hygiene standards.

The number of suppliers varies from group to group and notably depends on the centralization of decisions. These are long-term relations, governed by specifications manuals, even if they are informal in many ways. Depending on the group, prices are negotiated each week, every fifteen days or every month (or more often for ground beef). Even though our contacts didn't say so explicitly, commercial negotiations are generally very tough. French mass distributors are used to using their power to obtain maximum advantages (official or unofficial) from their suppliers, especially when they cannot supply a well-established national brand and are working on markets with cut-throat competition.

Delivery is mostly directly to the sales points, but prepared products are often routed through warehouses. Deliveries are daily for ground beef and two or three times per week for the other products. Maturation appears to take place more at the supplier than in the store.

Several groups want to develop partnership formulas with their suppliers with respect to marketing or even the preparation of products.

At the moment, when distributors are dissatisfied, it is generally with the regularity of quality and product traceability.

Here, too, it was difficult to obtain information about distributor margins, but we know that the average gross margin on meat is roughly 20%. However, this varies widely from one distributor to the next. Distributor margins depend mostly on the brand policy (e.g. a high gross margin on one type of product but a low one on another product) and the price of supplies.

Most of the interviewed distributors were not against starting negotiations with Danish producers. However, some prefer French meat; others are doubtful about the ability to adapt Danish products to the features of the French market. However, if they can adapt the quality of their products and offer competitive prices, Danish producers appear to have real opportunities. Quality was the most frequently mentioned factor.

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